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Romania: Economy Grows Above Expectations

Romania recorded its highest annual real GDP growth since the global recession of 2007-08, reaching 8.6% in Q3 2017. Even though the country has been consistently among the overachievers in the EU in terms of economic growth in the past years, this development has surprised experts which were projecting figures close to the Q2 performance (5.9%).

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Romania recorded its highest annual real GDP growth since the global recession of 2007-08, reaching 8.6% in Q3 2017. Even though the country has been consistently among the overachievers in the EU in terms of economic growth in the past years, this development has surprised experts which were projecting figures close to the Q2 performance (5.9%). Overall, for the period January-September 2017, Romania grew at 6.7% on seasonally adjusted data. The European Commission improved its outlook for the Romanian economy from 4.3% to 5.7%

One of the big drivers behind the GDP rise is undoubtedly the rise of private consumption, being spurred by the government’s increase in the allocation of funds for public sector wages and pensions. Also to be credited are the loose fiscal and monetary policies as well as the economic growth in Germany – Romania’s biggest export destination. In addition to this, industrial production growth during 2017 was particularly strong – peaking at 15% in May and averaging 8.7% for the period January-September.

Nevertheless, experts are concerned about how stable the growth will be in the coming quarters. Similar growth patterns were registered in the 2006-08 period when the National Bank management and the ruling party were the same. This period was followed by a steep decline in the coming years. The sudden jump in inflation in October (2.6%) should also be acknowledged, given that the country was averaging >1% inflation growth in the period January-August.

Q3 2017 was generally strong not only for Romania, but for the Central and Eastern European economies as a whole. While the EU 28 had an average 2.5% GDP annual increase, Latvia (6.2%), the Czech Republic (5%) and Poland (5%) formed the top 4 EU performers along with Romania.